The government sold 448.7 trillion rials ($879.8 million) bonds in the 43rd weekly auction -- the highest in the last fiscal year that ended on March 20.
Bond auctions are held by the Central Bank of Iran on behalf of the Economy Ministry to raise funds for the government’s deficit spending.
A report on the CBI website said the debt was mostly bought by institutional investors and that banks and credit institutions took 74 trillion rials ($145m).
Banks prefer short-term debt with lower yields while institutional investors are more inclined towards long-term debt with higher profits. The shortest maturity date for the latest debt is May 2023 at 25.6%.
According to the CBI, debt barely worth 5.5 trillion rials ($11.4 million) was sold in the 42nd auction purchased by institutional investors in the absence of banks.
Per ministry data, banks and credit institutions accounted for nearly 67% of the total bonds sold before the last auction.
The auctions started in May 2020 when banks and investment funds were instructed by the CBI to allocate a part of their resources to this end. Later, institutional investors and retail traders in the stock market joined.
Debt was offered in line with the provisions of the March 2022-23 budget in which the government could offer 860 trillion rials ($1.58b).
According to Economy Ministry data, 1,195.6 trillion rials ($2.34 billion) bonds were sold in 43 auctions in the last calendar year.
The figure shows a year-on-year growth of 32% compared to the year before. In the fiscal year that ended March 2022 the CBI held 36 auctions generating 906 trillion rials ($1.7b) down 27% from the year before.
Besides, the government sold treasury bills worth 350 trillion rials ($686m) during the period. Treasury bills are underwritten and given to contractors in lieu of unpaid bills.
The ministry has said that it paid the principal and interest on bonds worth 1,681 trillion rials ($3.2 billion) until February 22. More than 1,254 trillion rials ($2.45b) was the principal and 409 trillion rials ($801m) interest -- it being over and above government income from new debt offered during the period.
More Bonds in the Pipeline
The government can raise up to 2,000 trillion rials ($3.92 billion) from bonds based on the proposed 2023-24 budget, as approved by the Majlis.
Parliament has also allowed allocation of 1,750 trillion rials ($3.43 billion) for repaying government debt until March 2022. It approved a measure in the proposed budget allowing state-owned banks to issue 500 trillion rials ($908m) bonds in the current year. The bonds will mature in five years and the government guarantees the principal and interest.
Allowing lenders to issue bonds gives them leeway to secure funds when facing a liquidity crunch. When in dire need of liquidity, lenders usually borrow from each other via the interbank market or CBI.
Moreover, lawmakers allowed state companies to issue bonds to the tune of 1,000 trillion rials ($1.96b).
President Ebrahim Raisi submitted the 2023-24 budget to parliament on January 11. The highlights of the proposed budget include 19,840 trillion rials ($49.6b) as operating budget (including revenue mainly from tax and export tariffs) plus 1,800 trillion rials ($4.5b) for ministries and government institutions.
The budget of state companies, banks and for-profit organizations is proposed at 30,976 trillion rials ($77.4 b).The total budget is projected near 52,616 trillion rials ($131.54b).
